JSPL’s competitive advantage can strengthen with project expansions
Subscribe to enjoy similar stories. Shares of Jindal Steel & Power Ltd (JSPL) have surged about 15% from their recent low of ₹855 apiece seen on 13 November, outpacing the sub-4% gain in the benchmark Nifty 50 index. The outperformance is attributed to the company’s relative advantage, thanks to its greater presence in the long steel production.
Domestic long steel prices have stayed firm, buoyed by higher demand from the infrastructure sector and production issues faced by a domestic producer. In contrast, flat steel prices have softened due to continued imports from China, which primarily consist of flat products. For JSPL, long steel accounts for over 50% of total production, compared to 20-25% for other producers, providing a competitive edge.
Read this | Jindal Steel’s capacity expansion will fuel growth, but beware the China factor The company’s upcoming expansion and backward integration projects are expected to underpin a sustainable earnings growth outlook. “(JSPL’s) expansion projects are on track to deliver 20% earnings per share CAGR over FY2024-27E, with 18% CAGR volume growth and operating leverage," said analysts at Kotak Institutional Equities in a 9 December report. This expansion would push up JSPL’s finished steel capacity from 7.2 million tonnes per annum (mtpa) to 13.7 mtpa by the end of FY26, with half of the expansion slated for completion by March 2025.
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